The Reserve Bank of India (RBI) on June 5 announced a comprehensive package of measures aimed at supporting the rupee and managing external sector pressures. These steps include expanding the fully accessible route to cover all new 15-year, 30-year, and 40-year government securities, removing investment concentration limits, easing equity investment norms for non-residents, and extending such access to all individuals resident outside India. Additionally, the central bank introduced a concessional forex swap facility, provided full hedging cost support for dealer banks raising FCNR(B) deposits, and restored export realisation timelines to nine months.
Key Measures to Attract Foreign Capital
The measures are designed to attract foreign capital, deepen domestic markets, and improve foreign exchange liquidity. The RBI clarified that recent market chatter on exchange risk covers for foreign borrowing by public sector undertakings does not form part of the June 5 measures, which focus on banking and market-driven facilities.
Expansion of Fully Accessible Route
The RBI widened the scope of the fully accessible route to deepen the sovereign bond market and attract long-term capital. All new issuances of 15-year, 30-year, and 40-year government securities will now be included under this route. Earlier, only securities up to a 10-year tenor were eligible. The central bank also removed investment concentration limits under this route to enable broader participation. The government has provided tax benefits on government securities to support foreign investor interest.
Eased Equity Investment Norms
The RBI eased equity investment rules to increase foreign participation in domestic markets. Investment limits for non-resident Indians (NRIs) and overseas citizens of India (OCIs) in listed equity instruments without requiring SEBI registration have been increased. The same facility has been extended to all individual persons resident outside India, aligning their access with that available to OCIs.
Forex Swap and FCNR(B) Deposit Support
The RBI introduced measures to improve foreign exchange liquidity and support banks in mobilizing foreign currency deposits. A concessional forex swap facility will be offered to the market. Full hedging costs will be provided to dealer banks for raising FCNR(B) deposits.
Tightened Export Realisation Timelines
The RBI tightened export realisation timelines to accelerate foreign exchange inflows from trade. The time allowed for the realisation of export proceeds has been restored to nine months from the earlier temporary extension of 15 months.
Exchange Rate Policy Unchanged
The RBI stated that its exchange rate policy remains unchanged despite the new measures. The central bank does not target any specific level or band for the rupee and allows the exchange rate to be determined by market forces. It will act to curb excessive volatility and disorderly movements. Foreign exchange reserves stand at $682.3 billion, providing import cover of about 11 months, giving the RBI space to deploy market-based instruments if required.
